Income Tax Deduction Home Loan

Income Tax Deduction for Home Loan

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Income Tax Deduction for Home Loan

Home ownership has several benefits associated with it like pride of ownership, ability to capitalize on increase in real estate prices, income tax deductions and more. When home ownership is attained by taking a home loan, the taxpayer can save on taxes by deducting certain portion of the home loan repayment from the taxable income in addition to stamp duty. In this article, we look at how home loans can help you save taxes.

Tax Deduction on Principal Repayment

Under Section 80C, the amount that is paid as repayment of principal amount of a home loan by an Individual or Hindu Undivided Family is permissible as tax deduction. This tax deduction can be availed once home loan repayment starts with principal part of the home loan and completion of the construction with completion certificate awarded. No deduction is allowed for principal payment during the time when the property is under construction.

The maximum tax deduction permitted under Section 80C is Rs. 1.5 lakhs which also includes deductions for amount invested in PPF account, tax saving fixed deposits, equity oriented mutual funds, National Savings Certificate, Senior Citizens Saving Scheme, etc., 

Finally, the amount paid as stamp duty and registration fee is also permitted as tax deduction under Section 80C, even if the taxpayer has not availed Loan.


Tax Deduction on Interest Repayment

Under Section 24, tax benefit is available for home loan interest payment. As per Section 24, the income from house property can be decreased by the amount of interest paid on home loan, when a loan has been availed for the purchase or construction or repair or renewal or reconstruction of a residential house property. The maximum tax deduction permissible under Section 24 of a self-occupied property is limited to a ceiling of Rs. 2 Lakhs. In case the property for which home loan has been availed is not self-occupied, there is no maximum limit and the taxpayer can take tax deduction of the whole interest amount.

Tax Deduction for Pre-EMI Payments

Often times while purchasing an apartment or booking an apartment, the home loan is disbursed to the builder in stages and the home buyer begins to service the loan in the form of a Pre-EMI.  In such circumstances, Section 24 categorically states that tax deduction for payment of Interest is not allowed before the construction is complete.

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Comments (1)

Shashikant Yadav

Apr 13, 2017 at 9:50 AM

Great article sir. Very helpful.


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